Budget deficit projections dependent on rate outlook

Although the Congressional Budget Office's (CBO) latest projections show the Federal budget deficit at only 2.6% of GDP in fiscal year 2015, it does still expect the deficit to widen again before the end of this decade. Those projections are based on an assumption that long-term Treasury yields will rebound to pre-crisis levels, however, which looks to be inconsistent with the CBO's other assumption that real GDP growth will average only 2.2%, well below the pre-crisis average.